Have we become too data-driven?

I anticipated the question, but I wasn’t sure in what form it would come. Turns out it was about the extent to which high school and postsecondary curriculum should be aligned with what employers say they need, assuming they (1) know what they need; and (2) can communicate needs in terms educators can translate into curriculum design and operationalize. My response struck a somewhat philosophical tone:

“The goal of education is not to get a good job. It’s one of the goals. It’s not the goal.”

Such started a thoroughly enjoyable and thought-provoking stay in Coeur d’Alene last week for EMSI’s 2015 National Conference, where I served as the keynote presenter. EMSI posted a rundown of the conference and a selection of memorable quotes from participants. You can find my keynote slides posted on the CA website. Presentations were not recorded, but the slides should give you an idea of the key points – all things covered during the semester in my class at UT-Austin, but never assembled as a single talk in a partially autobiographical format. Thanks again to EMSI for giving me an opportunity to try that out.

So, have we become too data-driven? Given the nature of most of our projects at Civic Analytics, it’s something that is always on my mind when working with clients, as well as with students in my class. Examples include:

What is the appropriate role of data in planning, and how best should it be incorporated into a planning process?

How much insight can we really glean from imperfect data, such as job postings, about supply and demand conditions in the labor market?

Further, to what extent should we rely on labor market information at all to drive curriculum choices in K-12 and postsecondary education? We insist on “aligning” education and workforce development to employer needs in an employer-driven system based on labor market insight, but what good does alignment do if newly minted graduates don’t have the three to five years of work experience required to get a foot in the door for an “entry-level” job interview?

Do we have too much faith in data?

Answering that question depends on how you view data. For me, this is where the line is drawn that separates academic research from applied research. Most academic researchers would, I think, say that the goal of research is knowledge creation. That knowledge may be applied to improve the world in some way, but creation is the primary goal, and, hopefully, we are all smarter as a result.

Most applied researchers, at least in the economic and workforce development context, view data as a means of communication. Applied researchers are responsible for using data to tell compelling stories, create a sense of urgency about needed improvements, and inspire people to act. We are judged not so much on our ability to make sense of the world, but on our track record of inspiring public and private sector leaders to make tough and often unpopular decisions to act to improve it. That requires quite a bit of faith in data, but even more confidence in the ability of practitioner storytellers.

Teaching applied data analysis for planning in an environment dominated by infographics, lofty claims about the power of “big data,” and a growing spotlight on open data in the public sector is increasingly difficult. The gains we’ve made in data accessibility are unbelievable, and planning is better off because of them. Yet, when confronted with such a vast amount of data, it’s easy for early-career planners and students to focus only on the mechanics of dealing with data–methods, statistics, dashboards–and less on the power of good storytelling. Knowing your audience. Avoiding jargon. Creating data-driven calls to action and goals that connect with community priorities. Inspiring people to want to act, and then empowering them with the insight and tools to do so.

Teaching methods is relatively easy. Helping people learn how to use data to ask good questions and inspire action is much more difficult.

But based on the expertise in the room and quality of discussion at the EMSI conference, I think our profession has a bright future.

Photo: Peter Røise Photography

Migration Added $2.3 Billion to Travis County Income in 2012-2013

Governing published a stunning statistic about Travis County in its review of the 2011-2012 migration data released earlier this month by the IRS. Mike Maciag pointed out in The Counties Where Wealthier People Are Moving that Travis County ranked second nationally in the amount of net income gained as a result of people relocating–i.e. income of people moving in minus income of people moving out. Travis County at #2 ranked among some of the most popular retirement destinations in the country, including Palm Beach County (#1) and Collier County (#3) in Florida, as well as Maricopa County (Phoenix) in Arizona (#4). Travis County gained net adjusted gross income in the amount of approximately $1.1 billion in 2011-2012, a truly stunning figure, especially when compared to wealthy enclaves for retirees, where migrating net worth tends to be a one-way trip.

Stunning, that is, until the IRS released the 2012-2013 data yesterday.

Net adjusted gross income flowing into Travis County in 2012-2013 totaled about $2.3 billion, more than double the amount for 2011-2012, and nearly all (97%) of it came from people moving to Travis County from other states. I’ll wait for Governing to update their interactive to see where Travis County ranks nationally for 2012-2013, but based on a quick check of Palm Beach County and a few others from 2011-2012, I’m guessing Travis County will be at or near the top of the list again.

A few other observations from the 2012-2013 release:

An estimated 68,664 households and 115,006 people moved to Travis County in 2012-2013, up by at least 35% from 2011-2012. Accounting for people moving out, net migration added an estimated 26,883 households and 41,210 people to the Travis County population in 2012-2013, according to IRS data. Changes in methodology at the IRS prevent us from comparing the 2011-2013 data to previous years. But I’ve been watching this data for Travis County since 2005 and this is the first time we’ve been anywhere near 100,000 movers.

Florida has surpassed California as Travis County’s most significant donor state. Historically, Florida consistently ranked in the top five, but always well behind California. Now, Florida is well ahead, which leads me to believe that there may be something quirky going on with the IRS data. Perhaps the change in methodology has fixed a historic undercount for Florida. Whatever the case, net migration from Florida added an estimated 6,647 households and 9,695 people to the Travis County population in 2012-2013, compared to just 2,092 households and 4,278 people from California. Net transfer of wealth was also much greater from Florida compared to California. Travis County gained approximately $1.1 billion from Florida movers, compared to just $261 million from California. Estimated adjusted gross income per household for Florida residents moving to Travis County in 2012-2013 was $128,509, compared to $98,979 for California households.

Speaking of California, Austinites might have to find another scapegoat, at least when it comes to blaming the state for driving population growth. In addition to Florida, California also trailed New York in net migration to Travis County for both 2011-2012 and 2012-2013, and Georgia wasn’t far behind in 2012-2013. However, you are likely still safe in blaming Californians for driving up housing costs, or perhaps thanking them for fueling Austin’s love-affair with high-priced foodism, whichever way you prefer to look at it. With an estimated average adjusted gross income of $98,979 per household, Californians moving to Travis County have relatively higher incomes than movers from other states sending significant numbers of residents to Austin, with the exception of Florida ($128,509).

Consistent with previous years, in-state movers had little impact on Travis County’s net increase in population due to migration, according to IRS data. Virtually the same number of people moved into Travis County from other counties in Texas as moved out. Travis County’s net gain in population resulting from migration can be attributed almost entirely to people moving to Travis County from other states.

For questions about the IRS data, see my recent primer on migration. I’d be interested in your thoughts on Florida in the comments section. Some have speculated a recent influx of retirees to Austin.

Migration Matters: Is California Ruining Austin?

A recent article over at Do512 reminded me to check for new migration data from the IRS, and, unfortunately, we’re still waiting on 2012. While we wait, here’s a refresher course on the extent to which we can blame California for worsening traffic, rising home prices and rents, or any of the other consequences of Austin’s growth and economic success.

Data Challenges

There are many. The two most commonly used sources of data on migration are the U.S. Census Bureau’s American Community Survey (ACS) and tax records from the IRS. ACS estimates are derived from samples and therefore have margins of error to deal with, and IRS data excludes people who don’t file taxes. Both have considerable time lags, and are subject to regular attacks by free-dum loving politicians, jeopardizing future availability. ACS provides summary statistics for how many people move in and out of cities, but not much on specific origins or destinations. IRS provides county-to-county looks, but nothing for cities.

So, the best we can do to get a handle on the impact of migration from California to Austin (city) is to use ACS and IRS data and look at Travis County. Hopefully one day we will find a client to foot the bill for exploring the reliability of migration data from private vendors, or perhaps even collect our own primary data for Austin, but for now we are limited to what’s available from public sources.

Interpretation Challenges

This is different from challenged interpreters, who are usually politicians and boosters emphasizing move-ins and neglecting move-outs. Believe it or not, people do actually decide to move away from Texas, and, yes, even Austin. Interpretation challenges include things like boomerang migration–e.g., somebody moves from San Francisco to Austin, toughs out two summers here while developing a newfound appreciation for BART, and then moves back to San Francisco. That person shows up in the data as one “Californian” moving to Travis County and then one “Austinite” moving to California. Or, to complicate even further, make that person an Austin native who moves to San Francisco, can’t find acceptable brisket or $2 Lone Star anywhere, and then moves back to Austin. He shows up in the data as a “Californian” moving to Travis County, when, really, the two moves should cancel each other out, at least in how we commonly perceive and talk about migration’s impact on Austin.

Same goes for what Ryan Robinson, City of Austin’s demographer, calls “two-step” migration. Suppose somebody moves from San Francisco to Dallas and then the following year to Austin. She shows up in the data as a California transplant to Dallas County in year one, but then as a Texas transplant to Travis County in year two. She may even still have California plates, but, according to the data, she’s a Texan.

And there are other limitations to be aware of. For example, IRS migration statistics are reported in tax terms–i.e. number of returns and exemptions as reported on tax filings, not households and people. Most researchers use returns as proxies for households and exemptions as proxies for people, but they are not one-to-one comparisons (e.g., a married couple filing separately can be two returns but one household). Further, the IRS goes to great lengths with statistical procedures employed to maintain confidentiality. Consequently, there are missing values, especially for small and rural counties.

While you may feel perfectly comfortable drawing conclusions about how wealthy your new neighbor from California is by looking at home prices on Zillow or TCAD, being able to derive her household income from IRS migration data would be bad. We can’t track movements of unique households or individuals over time, either, just in aggregate snapshots, which makes migration analysis difficult but keeps the purveyors of freedom in Congress at bay.

The Californicators (I miss John Kelso’s regular column)

How many Californians are invading Austin? Somewhere between approximately 58,000 (IRS) and 81,000 (ACS) people moved to Travis County from another county in the U.S., on average, per year during 2008-2012. Roughly 60% of those new residents in Travis County came from some other county in Texas. The estimated number of people moving from California to Travis County annually between 2008 and 2012 ranged from approximately 3,800 (IRS, 2011 reporting year) to 4,400 (ACS). So that means California was responsible for about 15% of the 24,000 (IRS) to 29,700 (ACS) moving to Travis County from outside Texas on average per year during 2008-12.

California is, by far, the most significant “donor” state of residents to Travis County, but still pales in comparison to the number of people moving here from other parts of Texas. Further, California doesn’t make up anything close to a majority of people moving to Travis County from other states–for every seven people you meet who have moved here from another state, only one of them is likely to be from California.

Now, what happens when we account for people moving out of Travis County? Estimates for people moving out of Travis County to another county in the U.S. ranged from approximately 50,900 (IRS) to 69,000 (ACS), on average, per year during 2008-2012. Travis County usually breaks even, more or less, with the rest of Texas–i.e. the number of people moving in to Travis County from another county in Texas is roughly equivalent to the number of people moving out of Travis County to another county in Texas. That can change in some years depending on local economic conditions, but over the long term and looking at both IRS and ACS data it’s roughly a stalemate, with Travis County gaining at most 1,000-1,500 people per year.

Net migration (move-ins – move-outs) from other states is more of a factor in Travis County’s overall population growth. Travis County gained, on average, somewhere in the range of 8,505 (IRS) to 9,200 (ACS) people per year from other states during 2008-2012, including approximately 1,000 (ACS) to 1,400 (IRS) from California. To put that into perspective, average attendance at an Austin Aztex home game is 2,687. So, using the high end of the range, the number of people Travis County is gaining (net) from California every year is equivalent to about one-half the number of people you will find at an Aztex game. Not exactly what I’d call a population “driver.”

Well can we at least blame them for rising home prices?

Sadly, this, too, is problematic, or at least unclear. Using the IRS migration data (2011), adjusted gross income per return (household) for people moving from California to Travis County was $78,384, well above the $67,118 for existing Travis County residents (non-movers), but well below some other states.

Illinois, for example, sends one-third as many people to Travis County as California, but adjusted gross income per return for Illinois transplants was nearly twice that of California ($148,173), according to IRS data (2011). In fact, people moving to Travis County from seven other states had higher adjusted gross incomes per return than people moving to Travis County from California that year. While the aggregate impact of more Californians with higher than average incomes moving to Travis County may outweigh the impact of other, even higher income states with fewer transplants, Californians are not the wealthiest people moving here, at least on average.

Visit Census Flows Mapper for breakdowns of migration by income, race/ethnicity, educational attainment, employment status, and more. Perhaps you can even shed some light on the reported “mass exodus” of Austin residents.

Quantifying a Tech Talent Gap

The Austin Technology Council released preliminary findings from our tech talent study yesterday at the annual CEO Summit. With a data assist from EMSI, we estimated total demand for core tech occupations to be somewhere in the range of 2,500 to 3,500 job openings expected per year in Austin. The study included the usual secondary data–job postings, payroll records, etc.–and an employer survey conducted in April 2015 to provide a primary data check for what we observed in the EMSI estimates. The employer survey also captured some interesting perspective on the so-called skills gap or talent shortage facing leading regional tech markets like Austin. Summary findings are posted on the ATC website at the link above or you can download the presentation directly here (PDF).

The first time I worked on a “workforce gap” study was in 2000, in my first economic development job at the Sonoma County Economic Development Board. We wanted to know annual labor demand for high-tech workers, as they were called at the time, especially in the North Bay’s telecom cluster. While the data and tools for measuring supply and demand in the labor market have improved considerably, some of the methodological challenges are the same today as they were fifteen years ago.

For example, labor markets don’t operate like commodity markets. Price of labor (wage) is not as responsive to relative movements in supply and demand, for a variety of very complicated reasons, especially when you try to measure market conditions for one particular industry sector. Firm-level versus industry-level issues are also extremely difficult to sort out. If larger, established corporations report less difficulty finding qualified workers compared to smaller, growth-stage companies, is there a talent shortage? A researcher’s gut reaction may be to look for differences in wages, benefits, working environment, etc. at large companies versus small companies, but what if all of those factors were comparable?

And then there are regional effects. Austin wages are assumed to be low relative to high-cost markets like San Francisco, Silicon Valley, or Washington DC, given cost of living differences. But to what extent are lower home prices, rents, and breakfast tacos able to make up for $20K or $30K in wages? Is the Austin premium still what we think it is, or have home prices, rents, and traffic increased enough here to reset the scale with California?

Much more work to do here with ATC and others. Stay tuned.

Austin Innovation District

Thanks to Mike Kanin and the Austin Monitor for hosting last night’s panel on Austin’s planned innovation district anchored by the new UT medical school. During my comments I mentioned the DC innovation district plan for the Saint Elizabeths campus as a potential model for framing our thinking about what an innovation district should look like here in Austin. Here’s some follow-up reading to the panel discussion that expands on the points I made:

Regional Innovation Clusters and Urban Economic Revitalization

DC Innovation Strategy for Saint Elizabeths

I was fortunate to serve as one of the project managers for the Saint Elizabeths planning work during my time at the U.S. Economic Development Administration and got to know Chris Gabriel and Bomani Howze a bit. They’ve both been kind enough to visit Austin recently to talk about what we should want out of our innovation district effort. It would be wise to keep a line of communication open with Chris and Bomani as Austin’s effort takes shape. Sherri Greenberg at the LBJ School of Public Affairs has a forthcoming report on innovation districts, too, which I’m sure will provide additional examples worth considering.

The message I was trying to get across last night is simple: this is a unique point in Austin’s history where we have an opportunity to showcase to the world how economic development can be made more sustainable and inclusive. The data is pretty clear about the challenges facing a very large share of Austin residents in terms of earning a living wage that can keep up with steadily rising home prices and rents–and what that means for economic segregation.

Pay particular attention to the strategies discussed in the Saint Elizabeths report about workforce development and targeted support for minority-owned businesses. We are well-positioned in Austin to capitalize on those types of opportunities with a strong network of workforce training providers, city and county governments that understand (and fund) the connection between workforce development and economic development, and one of the best city-operated small business development programs that I’m aware of.

Our public dialogue about Austin’s proposed innovation district should not focus on real estate plays, design standards, and where we draw lines on a map. Don’t get me wrong, those are important topics–I teach in the planning department after all and would like to continue doing so–but they are secondary priorities. Nor is this simply about creating more publicly subsidized office space for technology companies or lab space for Austin’s growing life sciences industry. The UT medical school will do plenty to contribute to Austin’s entrepreneurship ecosystem and innovation-based economic development without an innovation district.

Travis County voters decided in November 2012 that the UT medical school and teaching hospital were worth investing in through a property tax increase. While I may have disagreed with how we got here, we now have an obligation to ensure that we make the most of this opportunity. We’ve been consumed lately with questions of affordability, equity, and, ultimately, what we value as a community. The innovation district is an opportunity to make good on our promise of inclusive prosperity, but only if we go about it in an intentional, deliberate way–as Chris and Bomani like to put it, by building “direct and deliberate bridges.”

Get it right, and we have a uniquely Austin model that can help redefine economic development and showcase to the world what’s possible through public-private partnerships. Let this opportunity pass by and we’ve done little more than added to the cynicism that already pervades discussions about economic development.

The UT medical school and teaching hospital are going to redefine how we think about healthy communities and the way in which we deliver health care services. We should strive for no less when it comes to economic development.

GeoDesign: The Next Step in Data-Driven Decision-Making for Community Planning

This post was written by Nathan Brigmon, GIS Analyst at Civic Analytics.

In January, I attended the 2015 GeoDesign Summit in sunny Redlands, CA to give a “lightning talk” on the application of GeoDesign in urban planning. My topic was using interactive 3D models and scenario planning to measure the impact of urban rail in Austin, TX. I received a lot of great feedback, met really smart people, and learned a lot about GeoDesign and why we’ll be seeing more of it in the future. This post introduces GeoDesign, provides examples of how GeoDesign is being applied in planning, and offers a few lessons I learned from using GeoDesign in the planning process for urban rail in Austin.

GeoDesign is the intersection of people, geographic science, design, and information technologies. It represents a new way of thinking about how we should respond to today’s planning and design challenges. But like most bold, new ideas, GeoDesign is going through a bit of an existential crisis in terms of how we define the practice. Here is a commonly used framework, shown at the Summit, to help visualize where exactly GeoDesign can be found:


Here are a few of my key takeaways from the GeoDesign Summit:

1. Statistics are critical. Noel Cressie, a rocket scientist from the University of Wollongong, Australia, stressed the need for GeoDesign practitioners to make more room for statistics, the science of uncertainty. Working with clients, our goal at Civic Analytics is to help people get from (a) uncertainty to (b) data to (c) information to (d) decision-making. In a world of uncertainty, we need statistics. Cressie was spot on.

2. Data collection can be fun. Ulf Mansson, a sustainable engineering and design specialist, showed us how GIS data is being used in Minecraft to explore how we think about our world. His team created a virtual Stockholm called “Blockholm” with real GIS data, which allowed kids and adults to plan, build, and change the infrastructure. This led to interesting conflicts and forced discussions about tradeoffs among the participants, illustrating how the gaming industry has great potential for exchanging ideas involving the real world.

3. Confront people with data. Joe Minicozzi, an architect with a mind for taxation economics, showed us incredible data on how Walmart stores usually return less value per acre than downtown structures, despite having 20 times more acreage. He pointed out how some U.S. cities are actually “going broke by design.” The key to fully understanding these issues and reaching consensus with stakeholders about how and why communities want to grow is to be able to visualize these facts, making it easier for most participants in a planning process to interpret data and reach their own conclusions. GeoDesign solves this problem.

4. Crowd source whenever possible. The finale of the Summit was a roundtable discussion with ESRI CEO Jack Dangermond on the purpose, reach, and ambitions of GeoDesign. Using web-based GIS, he wants to recruit users (in an openstreetmaps.org type effort) to map biometric imagery across the country and eventually the world, which in turn would be used to inform and strengthen National Park policy. The resulting dataset would then be available for any country interested in environmental policy.

The GeoDesign Summit revealed great promise for those hoping to inform decision-makers with good data, however, it was clear the field still has growing pains to get through. Which brings me back to Austin and urban rail.


Working as a member of a University of Texas at Austin research team, I helped create an interactive 3D model of the proposed urban rail line, allowing anyone to view, comment, and explore the impacts of build and no-build scenarios.

GeoDesign allowed us to validate data in a third dimension–it gave us the ability to examine height, density, and form impacts resulting from land use decisions–which was a significant improvement over 2D maps.


Because GeoDesign technology was not very well known at the time, we did not use or discuss it as much as we could have with internal and external stakeholders until the end of the project. One of GeoDesign’s most powerful features is helping people consume or interpret data in a way that appeals to planners and non-planners alike–it facilitates decision-making during a planning process, allowing for more informed and, hopefully, participatory debate about planning alternatives.

If I could do this process over again, I would encourage our planning team to better integrate 3D modeling earlier in the process. 3D models are more intuitive to non-planners and therefore promote transparency in a public decision-making process. That is why GeoDesign is so promising. The combination of modeling capability, interactivity, and feedback provides a platform for more collaborative, transparent, and data-driven decision-making. It’s a common language for designers, planners, programmers, city officials, and citizens.

As planners, we are challenged to make sense of ever larger and more unwieldy data sets–and derive meaning from them for technical and non-technical audiences. GeoDesign is an exciting advancement that holds a lot of potential for transforming how we design and conduct planning processes.

For more on how we’re using GeoDesign at Civic Analytics, please watch this short video.

State of Human Capital in Austin 2015: Growth, Prosperity, & Inequality

Now that inequality appears to be politically palatable enough for polite conversation at the national level–despite certain notable people saying so for years–we’re left with the question of what to do about it.

Austin is struggling to find a path forward, as well, even though the debate here occurs primarily under the headline of “affordability.” But we’re really talking about the same core issue: inclusive participation in economic development.

But first, some data. Here are a few slides from an upcoming talk on the state of human capital in Austin. Click on the images to make them larger.

Austin’s economic development scorecard since 2000:


Including the astounding growth of Austin’s well-educated population:


Which has done very little to raise average wages lately:


But transformed Austin’s economy in the 1990s, as average earnings for bachelor’s+ workers nearly doubled:


Giving rise to the “Two Austins” narrative that defined many city council races last year and, in my view at least, is the single biggest threat to Austin’s economic development:


Now, what to do about it. Seems to me there are four related and very complicated questions that we need to wrestle with:

1. Austin is adding bachelor’s+ people at a much faster pace than jobs are being created for them. What is the ripple effect on the labor market and how is underemployment impacting affordability?

2. Being The Human Capital cuts both ways. It’s the foundation of Austin’s economic development success. But is our success in attracting and retaining highly educated and skilled workers undermining the need for a sense of urgency and more investment in human capital development to ensure inclusive participation?

3. Austin is among the U.S. leaders in growth of so-called “middle-wage” jobs, which the National Employment Law Project and others have identified as jobs that pay in the range of $13.84 to $21.13 per hour. However, there’s a popular narrative that I hear regularly that suggests Austin is creating a lot of high-wage jobs and plenty of low-wage jobs but middle-wage jobs are lagging. Both of these things can’t be true. Either the research on middle-wage jobs in Austin is wrong, or there is something else going on that is shaping perceptions of Austin’s labor market in a way that does not conform with reality. Perhaps being among the U.S. leaders in middle-wage jobs is not enough–i.e. even at middle-wages people are struggling to keep up with rising costs of living in Austin? Or, even though we’re among the U.S. leaders according to growth rates, perhaps the middle-wage share of total employment has declined in a way that’s forced middle-wage workers to compete for lower-wage jobs.

We should sort this out and secondary data alone isn’t going to be sufficient.

And perhaps the thorniest question of them all:

4. What is the proper role for economic development policy–and the public sector in general–in addressing the inequality that’s fueling concerns about affordability, gentrification, and so many other challenges facing Austin?

What, if anything, can a city or a region do about it?

I understand we’re in the middle of transforming city government in Austin. These questions would be a good place for an economic development committee to start.

What do falling oil prices mean for economic developers?

The falling price of oil will compete for economic story of the year in 2014, but what does it mean for economic developers heading into 2015? Most of the attention so far has been paid to oil-producing states like Texas and North Dakota, but for economic developers in non-production states, could lower oil prices create opportunities for leveraging their own competitive advantages?

Economic developers have access to many tools that can help frame the situation for their communities. The first step is to understand how oil and gas impacts your economic geography. Using the fabulous new and improved U.S. Cluster Mapping Project, developed by Michael Porter’s team at Harvard Business School and funded by the U.S. Economic Development Administration, and 2014 estimates from EMSI, I ranked the top fifteen counties by jobs in the Oil & Gas Production & Transportation Cluster in Table 1.

Harris County (Houston) is the obvious outlier, but falling oil prices will have even more severe impacts on smaller counties where the oil and gas cluster makes up a larger share of total employment and carries a huge multiplier effect, such as in Midland and Ector County, Lafayette Parish, Williams County (Williston), and Lea County. Larger and more diversified counties, such as Dallas, Tarrant, and Los Angeles, will no doubt feel the impact of lower oil prices through declines in corporate profits, lower earnings, and reduced consumer spending, but the shock should be absorbed to some extent by virtue of having other industries to lean on.

So how strong might that shock be? Oil and gas industry market forecasts seem to be all over the place, but some analysts are projecting declines of up to 30 percent:

According to Porter’s team at Harvard, there are twelve industries in the oil and gas cluster. Let’s assume that lower oil prices result in a 20% decline in earnings across all industries in the oil and gas cluster. That’s probably a bit steep in terms of how lower corporate earnings would translate to wages and salaries of workers, and it’s unlikely that lower oil prices would produce the same 20% decline across different industries in the cluster (e.g., extraction vs. oilfield machinery manufacturing). But we’ll use it here for the sake of illustration.

Table 2 (second tab if you’re using the link) shows how a 20% decrease in earnings may impact the counties in Table 1, based on my analysis of EMSI data and accounting for direct and multiplier effects.

Whatever your experience and/or intuition says about oil prices in 2015, economic developers working on behalf of communities with strong oil and gas clusters should be doing scenario analysis like this right now, evaluating a range of potential impacts of lower oil prices and how public services, such as the workforce development system, may be affected. Further, many community colleges and technical schools have added new programs or expanded capacity to meet the strong demand for oil and gas workers during times of higher prices. Seek out and collaborate with your education partners, too, so they can weigh in and benefit from the results of your analysis. Many of them have likely been through this before.

Economic developers everywhere would be wise to follow suit, even in communities with little or no obvious oil and gas industry presence. Austin, for example, is known for technology, not oil and gas. But as Dan Zehr, who covers finance and the economy at the Austin American-Statesman, explains in his excellent deep-dive on Austin’s oil and gas industry, the “Blueberry in the Tomato Soup” will not escape the downsides of falling oil prices because earnings from oil and gas holdings are a key driver of the regional economy.

Earnings are wages, salaries, supplements (employee benefits), and proprietor income. As Zehr points out, investors, owners of holding companies, and the like derive significant income from oil and gas while living in Austin–with very few oil and gas jobs showing up in an analysis of the local economy. In fact, according to EMSI estimates, oil and gas extraction is the eleventh largest contributor to Austin’s GDP at $1.63 billion per year in value added, but only accounts for approximately 1,300 jobs (0.1% of total employment). Yet, the same 20% decline in earnings modeled above for the oil and gas cluster results in a loss of an estimated $307 million in earnings and 5,700 jobs for the Austin-Round Rock MSA, according to my analysis of EMSI data.

And it’s not just places in major production states. The oil and gas cluster accounts for at least $200 million in earnings in Contra Costa County, CA, Lake County, IN, Salt Lake County, UT, Jackson County, MS, Yellowstone County, MT, Dakota County, MN, Orange County, CA, Lucas County, OH, and Duchesne County, UT, as well as several higher-profile counties in Pennsylvania, according to EMSI estimates.

What about the upside of lower oil prices? Indeed, lower oil prices may present an opportunity for some economic developers. According to other data from EMSI, approximately 85 percent of total sales in oil and gas extraction go to petroleum refineries, which are part of the oil and gas cluster as defined by Porter’s team at Harvard. Sorting out and measuring the feedback loops within the same cluster is complicated. However, there are several industries not in the oil and gas cluster that use oil and gas extraction products as inputs that may benefit from lower prices.

Economic developers in places such as Salem County, NJ, Orangeburg County, SC, and Morgan County, AL (petrochemicals), Clayton County, GA (air transportation), Sarpy County, NE (trucking), and McCracken County, KY, and Unicoi County, TN (chemicals) all have major employers in industries that represent $200 million or more in sales nationally for the oil and gas extraction industry.

I have no idea what lower oil prices may mean for those industries, but it’s a good conversation starter for economic developers who want to approach local industry representatives about business retention and expansion, getting a cluster initiative up and running, recruitment and/or entrepreneurship possibilities through supply chain analysis and import substitution, etc.

Economic developers are in a unique position as experts on their local economies. They stand at the intersection of the public and private sectors, and the best economic developers can leverage their expertise on the local economy to identify opportunities for public-private partnerships.

For economic developers in regions with strong oil and gas clusters, now is the time to evaluate what sustained lower oil prices may mean for your economic geographies. Economic developers in non-oil and gas regions should take advantage of the tools at their disposal, as well, to explain to community leaders how lower oil prices may impact their local economies, aside from the price at the pump.

Most seasoned economic developers I’ve worked with have at least one success story that began with a seemingly trivial conversation, perhaps about something like gas prices. But armed with the right information, you never know where those conversations may lead.

Adjusting to Life as The Human Capital

Note to non-Austin readers: most of the data analysis we share here is for Austin because we live in Austin and want to generate awareness about how and why Austin is changing, and, perhaps, what we can or should do about it. But nearly everything posted here can be recreated for other communities using readily available public data. ~ Brian

Austin, Texas: A Theory of Everything (cont’d)

Why being The Human Capital is, in the immortal words of Homer Simpson, the cause of, and solution to, all of life’s problems

The Austin Chamber ran a campaign a few years ago branding Austin as The Human Capital. The tagline is still featured as the core message to site selection consultants. We’re certainly in the running for that title. The Austin-Round Rock MSA has added an average of 17,000 highly-educated people (bachelor’s degree or higher) per year to the region’s population since 2000–an 80% growth rate that ranks #4 among large U.S. metro areas with at least one million in population.

And while Austin appears to be squarely in the path of the Silver Tsunami, most of this “brain gain” has directly impacted Austin’s labor force. People age 65+ make up about 12% of the approximately 507,000 residents of the Austin-Round Rock MSA with a bachelor’s degree or higher (bachelor’s+). If we assume that people age 65+ are a similar share (12%) of net change in Austin’s total bachelor’s+ population, then that means Austin’s primary working age population has gained about 198,000 bachelor’s+ people since 2000. According to the Census Bureau, 87% of bachelor’s+ people age 25-64 in Austin are in the labor force. So that works out to about 173,000 bachelor’s+ people joining the labor force in Austin since 2000, or roughly 13,000 per year.

To put that in perspective, excluding everybody in Austin age 65+, a gain of 198,000 bachelor’s+ people would drop Austin in the rankings among large metro areas only three spots, from #4 to #7, still well ahead of fast-growing, economically successful places such as Orlando, Portland, and Denver.

Being The Human Capital also makes good economic sense. As with most things in life and data, correlation should not be mistaken for causation. But the signal is pretty strong. Here’s a chart showing the growth rate of nominal gross domestic product (GDP) and the growth rate of bachelor’s+ population for the top 100 metro areas ranked by population. Clearly, human capital is playing a role in driving economic growth across the U.S., and Austin is among the winners of this “war for talent.”

2014-10-29 Growth in GDP vs Bachelor's+ Population MSA

Now, the downside risk, as they say. While we love touting our place at the top of the latest “best of” list, Austin is struggling to come to grips with its rapid ascent. Nowhere is that more evident, especially during this campaign season, than in conversations about inequality, gentrification, and affordability.

I’ll get to housing in detail in a future post. For now, let’s just focus on how adding 13,000 highly-educated people to the labor force per year could be impacting Austin, generally. First, there’s the obvious: growing prosperity, at least in the aggregate. Average earnings for bachelor’s+ workers age 25+ in Austin are $85,608, according to the Census Bureau. That’s about $30,000 more per year than the average for all employees in Austin, which goes a long way toward explaining the explosion of discretionary income that’s fueling our local culinary scene.

Next, growing disparity. Bachelor’s+ workers in Austin, on average, earn about $30,000 more per year than workers with some college or an associate’s degree, and about $40,000 more than workers with only high school. And while the bachelor’s+ population may be growing at the fastest rate, other segments of Austin’s workforce are growing at a healthy pace, as well. Workers with a high school diploma or less make up somewhere between 275,000 and 300,000 employees in the Austin-Round Rock MSA; the high school diploma population has grown by 54% since 2000.

Further, Austin’s rapidly growing bachelor’s+ population is likely exacerbating inequality along race/ethnicity lines, although it’s difficult to say for sure until we have better data available (innovative research efforts like the Central Texas Student Futures Project are certainly helping). For example, according to the latest available census data, only 23% of Black employees and 17% of Hispanic employees in Austin have a bachelor’s degree or higher, compared to 49% of Whites and an astounding 67% of Asians. While each race/ethnicity group in Austin has more education, on average, than its peers nationwide, inequality in educational attainment in Austin translates to significant wage inequality. Average earnings for Black employees in Austin are $39,072 per year, which at 30% of total income, converts to affordable monthly housing costs of $977.

Spend ten minutes looking online for rental housing of passable quality at $977 or less per month in centrally located neighborhoods around Austin and you’ll quickly understand why gentrification has been a dominant theme this campaign season.

Inequality of that magnitude isn’t unique to Austin, of course, but the gaps are wider here compared to some other regions. In my hometown of Raleigh, NC, for example (#5 right behind Austin in bachelor’s+ population growth), average earnings for bachelor’s+ workers are $75,228, and the gap between bachelor’s+ workers and some college or associate’s degree workers is about $5,000 smaller than it is in Austin. I have no idea what difference, if any, $5,000-$10,000 per year could make in shaping our perceptions of inequality and affordability in Austin, compared to other fast-growing, economically successful places like Raleigh. But it’s large enough to get your attention, especially considering the pace at which we are adding highly educated people to the population. More on this later when I take up housing in more detail.

Finally, there’s underemployment. Recall that we’re adding about 13,000 bachelor’s+ people to Austin’s labor force every year. It’s difficult to sort out exactly how many jobs requiring bachelor’s+ education we’re adding to absorb that increase in the labor force, but at the risk of raising the ire of the nuance police, we can take a shot at it. According to data from EMSI, we’ve added, on average, about 4,000 jobs per year since 2001 in the Austin-Round Rock MSA in occupations where the typical education needed for entry-level employment is a bachelor’s degree or higher. So that’s 13,000 more bachelor’s+ candidates competing for 4,000 more bachelor’s+ jobs each year. Moreover, even in “boom” years of higher than average job growth for Austin, we’re adding only about 8,000 bachelor’s+ jobs, which is still not enough to meet the demand of 13,000 new bachelor’s+ candidates in the region.

Thus, if you are highly educated and finding it difficult to navigate Austin’s labor market, you’re not imagining it. The Human Capital is getting pretty crowded these days. Now consider what it’s like for the other 63% of Austin’s adult population, which includes approximately three out of four Black employees and four out of five Hispanic employees, struggling to keep up with the rising cost of living in Austin with no bachelor’s+ and on no more than $1,000 per month for housing costs (i.e. rent plus utilities, etc.) and you can quickly see why inequality, gentrification, and affordability are the key topics in most city council races right now.

Austin’s standing as The Human Capital should be celebrated, but the invited guest list needs to be more inclusive.